ThinkHouse TUPE Club: Key questions on a service provision change

Hannah Swindle: Good morning everyone.

To introduce us this morning – I am Hannah Swindle – a Legal Director in our employment labour and equalities team here at Gowling WLG, and I am joined by Jasmine Coyne, a senior associate in the team.

This live webinar this morning is designed to help you deal with some of the frequent issues which can arise on a TUPE outsourcing or insourcing, or in some cases also on a business transfer, looking at how they affect both incoming and outgoing employers.

We will identify some common pitfalls/liabilities, how you can avoid them and give you practical tips on how to manage a smooth transfer.

The webinar is relevant for those on either the operational or legal side of a TUPE transfer.

Agenda

We will look at:

• Timelines
• Information requirements and avoiding common pitfalls
• Solving assignment issues
• Dealing with incoming employees on enhanced terms
• Managing performance issues with incoming employees

Timelines

So – to start us off - the first topic we wanted to look at is planning and timetabling for a TUPE transfer.

It's really important to make sure you start planning at an early stage to ensure a smooth transfer, whether that's a transfer of staff in or out.

There may be a number of different teams involved in a transfer from across the company – the HR, legal, procurement, contracts team - so trying to get a good cross business dialogue started as soon as possible and making sure everyone is joined up is essential. You may also need to coordinate with a subcontractor if they are affected by any transfer.

So what should you be thinking about, as either an incoming or outgoing employer and what are some of the main timelines you need to factor in?

First of all I wanted to mention gathering employee information.

Jasmine is going to cover in more detail the obligations for the outgoing employer to gather and provide employee information about the transferring employees in a moment, but this should be put on the list as one of the first things to factor in.

The outgoing employer needs sufficient time during the preparation process to be able to gather everything together. There are timing deadlines to provide information to either the incoming employer or the client of a service under both TUPE and also potentially under an existing services agreement. If you don't comply you could face penalties.

As a practical point - where there are greater numbers of transferring employees, or you need to coordinate with subcontractors as you're contractually responsible for ensuring that information is provided as well - the exercise is likely to take longer.

As an incoming employer, you will want to press for full information at as early a stage as possible, so you can start to look at who is coming over. You'll need this information to know whether you'll be able to staff the services from day one, or need to start recruiting, and also to check what terms the employees are entitled to – TUPE requires you to maintain current terms and conditions but you might not be able to do that for everything – for example, you may have to work out how to replicate insurance benefits. You also will be required to let the outgoing employer know if you proposing any changes to working conditions - or 'measures' - so they can be included in the consultation process.

This leads me onto the next element to consider in your timetable - The information and consultation process.

Both the outgoing and incoming employers have obligations under TUPE in relation to informing and consulting – and it's risky if you get this wrong – maximum compensation is up to 13 weeks' gross pay or a quarter of the wage bill.

There is no set time period for consultation – it just must be long enough to be effective – which means it must be carried out with a view to reaching agreement and the employer must be able to show that it has considered issues raised by the representatives/ employees.

When working out your timeline, you will need to consider if you need to elect employee representatives. You might have them already (or may have trade union reps), or you may not need to have them – they are no longer a requirement where you have fewer than 10 employees transferring or employer has fewer than 50 employees overall.

If the employer needs to (or wants to) have representatives for this transfer - as its sometimes helpful to give employees a route to ask anonymous questions - you will need to allow enough time in the process to have an election before the information and consultation process can start.

Practical and logistical issues will also affect the timeframe for the consultation– where are staff based? How many will need to be spoken to? Is it a holiday period – are there lots out of the business? What changes are the incoming employer proposing and are there lots of complex issues at play? These sorts of factors may make it more difficult to carry out a genuine and effective consultation.

And remember - even if there are no measures, case law says that you should allow time for voluntary consultation in any event and keeping the employees informed is usually helpful.

Information and consultation is primarily the outgoing employer's responsibility- but there are obligations on the incoming employer too – the obligation to provide measures that I've mentioned. Also – as an incoming employer you will want to keep an eye on what is going on - liability for a successful claim is joint and several so it could still end up being your problem if the outgoing employer doesn't do it properly.

Although you would usually expect to have contractual indemnities underwriting this risk, there are other reasons why carrying out proper consultation is important. You will want to make sure that a sensible process has been carried out for the staff – as this will help ensure a smooth transfer and help bring about a positive start to the employment relationship.

Often as an incoming employer you will want to factor in enough time to be able to take part, getting in front of the employees to start to win hearts and minds. Especially where you're proposing more significant measures, being able to explain the rationale for these and answer questions might help the process go more smoothly.

Don't forget as an incoming employer that you might also have to factor in an information and consultation process with your own employees. This will be required if they will be affected by the transfer in some way – it's not just an obligation for the transferring employees.

Finally - as a last point to flag on consultation, it is open to employers to start a collective redundancy process pre-transfer – either 30 or 45 days. If so, you'll need to pay attention to the timing of that process or it may have to be finalised post transfer. We haven't got time to cover that scenario today in any detail but we have covered it in previous webinars available on our Gowling WLG website.

The third point I want to cover is the date of the transfer

Often it may be obvious when the transfer will take place, but you need to be careful not to get caught out where the situation is slightly more complicated.

There may be a ramp up or longer transition period for the transfer of the services rather than everything transferring across in one go, which can make it difficult to work out when employees should be transferring. Often there may be a tipping point where it makes sense for the employees to transfer, or employees may transfer in tranches, especially where the outgoing employer still has responsibilities to satisfy for the customer.

There may be another factor triggering the transfer, such as an assignment of a lease in a property transaction. These external factors can become delayed (or alternatively happen more quickly than expected), so this is where the internal teams within the business need to keep everyone informed to avoid unexpected employee consequences.

It's essential to keep employees kept up to date to reduce uncertainty, and also on the flip side of that, to make sure that a transfer is not triggered accidentally when other teams are not ready. If HR and operations are not updated by property or legal, for example this could result in a failure to carry out a proper information and consultation process and could lead to potential claims as well as practical workforce issues where the employees are not in the right place to deliver the services.

So, what are the key takeaways?

• Start the planning process in good time before the intended transfer date
• Make sure all of the relevant departments, such as HR and commercial operations and legal are communicating and are joined up when dealing with a transfer - especially when they are not all on site together.

Thank you now I will pass over to Jasmine

Jasmine Coyne: Thank you Hannah and good morning everyone..

Hopefully, as you know TUPE stands for the Transfer of Undertakings and (Protection of Employment) Regulations 2006. It is protection of employment that is key and TUPE seeks to do this in a number of ways such as dictating that employees will employees transfer on their existing terms and conditions.

When an incoming employer is getting ready to accept new employees they want to make sure that there will be no surprises and will need information about those employees before they transfer.

In this section, we're going to look at how you go about getting the information you that you need whether you're an incoming contractor, or the client when insourcing or for the potential contractors as part of a tender process.

Regulation 11 ELI

• Under Regulation 11 TUPE the obligation is on the outgoing employer to provide employee liability information to the incoming employer to help them understand what they will inherit in terms of the number of people; the profile of the people and what basic terms and conditions they are on.
• I am not going to read out all of the particular categories of information on the slide, but they are set out there and you can see more detail in Regulation 11 of TUPE.

Limitations of ELI

• However, ELI is pretty limited in how helpful it is to the new or potential providers. Yes you get basic contract terms and whether there are any grievances or claims to note but ELI does not cover whether the employees have enhanced redundancy protection and, if the incoming employer is looking to reduce the headcount post transfer that type of information could be very significant and something that the incoming employer would need to factor into their pricing for example in a tender situation. Also ELI does not cover, for example, if the employees have valid restrictive covenants in place, it does not cover non-contractual benefits, or full information about pensions or administrative information that the incoming employer will ultimately need to honour post transfer.
• So, while it is a fall-back position, the information provided under reg 11 often does not go wide enough to cover other commercial issues. Additionally as well as the limited content provided under reg 11, ELI is also only required to be sent 28 days before a transfer. Again this is unlikely to suit a tender process where contractors are likely to have to bid for work well before 28 days before a proposed transfer. If relying solely on the ELI provisions and the 28 day timing stipulated in reg 11 contractors, would be quoting for work whilst having no information about potential incoming employees which will necessarily have an impact on the quotes provided.

Put together this is why the parties often agree to provide information that goes beyond ELI to provide more information and on a commercially useful timeframe.

Sharing and obtaining employment information in practice – contractual obligations to consider

Parties often stipulate as part of service provision contracts that certain information will be provided by the incumbent provider at a certain time.

• These contractual obligations will be wider and more onerous than what is required under TUPE and usually require information to be given at least at the tender stage, or for example at a specified time before the termination of the agreement for example six months before termination and there are also often requirements to provide information on termination.
• As well as providing the required information under the service provision contract, the current provider will also need to make sure it checks and complies with any other ongoing notification requirements and complies with any restrictions on changes to the terms and numbers in the workforce providing that particular service. For example, it is typical that the incumbent provider cannot make significant changes to the workforce or their terms and conditions in the period approaching the end of the contract, likely between the tender stage or from specified date up to the end of the contract.
• These contractual restrictions are known as "anti-sabotage" clauses which prevent the outgoing employer from effectively sabotaging a new provider or preventing a new provider from bidding for the contract. However you should be aware that although these protections might be in the contract there is always going to be a practical problem around having sufficient transparency to enforce these anti sabotage clauses because in order to know whether the incumbent contractor is making changes to the workforce near termination of the contract, you would need to have a point of reference as to what the workforce position was originally which practically you may not have. This lack of transparency is just something to be aware of when you are trying to pin down details about the workforce and when you are requesting their information.
  
  

What happens if they don't want to give the information?

What happens though if the current contractor doesn't want to provide the employee information about the workforce?

One of the issues that tends to arise in a situation where for instance there is a contractor providing services to a client and a new contractor is likely to come in, it is quite common to see some resistance from the current provider to provide some of the information asked for.

Starting point is to understand why they won't give the information.

This could be a practical issue, for example if the outgoing employer doesn't have easy access to the relevant information. This reflects the importance of information gathering and keeping it up to date by the HR team. Sometimes the incumbent contractor simply doesn't want to be helpful because they don't want to lose the contract.

And often there are concerns raised around data protection.

Data protection?

We won't dive into data protection fully but I do want to touch upon it briefly to flag the headline points that businesses need to consider when providing and requesting employee information as part of a TUPE transfer because if an outgoing employer is raising GDPR as a concern clients and incoming providers need to be able to, if the situation calls for it, persuade them otherwise.

GDPR does not stop us from sharing information in a TUPE situation but what it does mean is that we have got to focus our minds more on what information is being shared, why it is being shared and how we are going to go about doing that.

There are typically three scenarios that we will likely encounter when it comes to the transfer of personal data in this context.

Firstly there is the giving of employee liability information, in line with Regulation 11 of TUPE. Now from a GDPR perspective, if you are in ELI territory, the position is for the most part straightforward because providing ELI is a legal requirement under TUPE so as long as we provide the right information to the right person, in the right timescale then you have got a lawful basis for providing the information under GDPR. I did say that the position is for the most part straight forward because there is a word of caution here – although the ELI categories of information are quite limited, outgoing employers will need to check that nothing in the ELI schedule amounts to special category data. This could arise for example if the ELI schedule refers to a grievance about race discrimination or perhaps reveals that the employee is a trade union member because of details provided in the schedule in relation to a related claim. If that is the case then it that case, it will be necessary to identify an Article 9 condition as well as relying on the primary ground for processing and they are quite narrow, so be careful with that and we'd recommend you seek further advice if that is the case. But as I said in most cases you should be able to push back should a provider raise GDPR as a concern if the information is solely ELI and the timing is right.

The second scenario is where there is either an agreed process or a contractual requirement to provide information which goes beyond the scope of ELI under Regulation 11. As we've discussed that contractual arrangements to provide information usually go beyond ELI and are much earlier.

And then the third scenario, is when parties request detailed employee information when the transfer is about to happen such as the handover of detailed payroll HR information and personnel file.

These last two scenarios are clearly outside the scope of ELI so if a provider refuses to share information because of GDPR, the most common argument to make is that there is another lawful basis for sharing the data such as there being a legitimate interest.

Legitimate interest is the most common basis for processing data in this context and in order to rely on that ground it is important to firstly identify the legitimate interest and then also work out why sharing the data is necessary for the purposes of that legitimate interest and then you need to carry out a balancing test to balance the relevant parties' interests against the interests of the data subject before deciding that the balance of interest justifies disclosure of the information.

Where possible though, in particular where you are required to share data months in advance of the transfer as part of a contractual requirement, the easier way to comply with GDPR and to convince the incumbent provider to provide information is to anonymise data where possible as the information then being shared is not personal data.

This is often a useful option to advance when the incumbent provider is using GDPR as an excuse for not sharing employee information.

What can you do if the outgoing employer will not share the required information?

So what can you do if, despite your best efforts the outgoing employer will not share the required information?

Of course, from the point of view of the Client, the first thing is to check the contract between the client and current provider and consider what the requirements are about the provision of information by the current contractor and what are the requirements about the timing and when it must be provided?

As a takeaway I want to highlight the importance of always dealing with the end of the contract when entering into an outsourcing agreement. If the Exit clauses and practicalities are not dealt with properly, the Client can end up in a tricky position. For example, in the absence of a clause requiring information to be given, that can significantly impact the tender process, the price new providers will be prepared to take on the contract or the Client may have to take on the unknown risks, such as by giving an indemnity to the incoming employer if certain assumptions aren't true or the risk is greater than anticipated because not enough information was given to properly assess a risk. Practically though if you are in a position where you do not have a contractual right to receive information, there is no harm in asking for it.

Whether the contract is well drafted and deals with the requirements and process for giving information or you simply ask for it, there can still be push back from the outgoing employer.

If the outgoing employer doesn't want to, or cannot, give the right information, it may be in breach of contract. However at that point even though there is a breach of contract there is no actual loss at that stage, so the Client and incoming provider will need to think and agree about how they are going to deal with that breach. Practical steps the client could for instance take could be to opt to withhold payment for services from the current contractor (considering of course the risk of any impact on provision of service), or they could use other levers in the contract or in their relationship to persuade the current contractor to assist. For instance, the client might remind the contractor that service provision is often circular and the contractor could be on the other end of service provision change elsewhere in the market involving the same client. The client could also hint that co-operation would put them in good favour with future work or current tender for the client.

Ultimately though if contractors are refusing to provide information you will need consider what you have to negotiate with, whether that be the contract or relationship in general and try to use it.

I'll now hand you back to Hannah.

Solving Assignment Issues

Hannah: The next area we wanted to look at is who is in scope to transfer under TUPE and how you make sure these are the right people.

It goes without saying that it's better for everyone involved if there is as much certainty as possible about who will make up the transferring employees and I am going to talk about some of the possible issues that can crop up for both the incoming and outgoing employers.

So – first of all - who will be assigned to either a business/undertaking or a service? I'm not intending to cover assignment in any great detail here –

But as - a very quick reminder, there is no clear way set out in the TUPE regulations to work this out. Just say – assigned other than on a temp basis.

Caselaw has confirmed that you need to look at all the relevant factors. This will include the nature of the work they do, time spent on the relevant activities or business, what their contract says about their duties, what their responsibilities are in actual fact and whether they can be required to work on any other contract. Importantly It's not just the time spent by an employee on any particular activity but that can be a useful rule of thumb.

Also - don't forget about employees out of the business – they maybe on secondment elsewhere, or on sickness or family leave. These employees will still be assigned even if they are not actively engaged in the business or services at the moment.

Looking first at the problems facing an outgoing employer, what might you be concerned about and what do you need to keep in mind?

First of all – it's key to work out who should be in scope in good time before the transfer.

You may want to retain certain employees as they have specific skills or because they are needed on other client contracts. You may be losing staff who currently work across a number of contracts and will leave you short staffed if they transfer.

How would an employer make sure they can keep certain employees? As a first step - check that TUPE will actually apply to them –are they assigned? for those who work across more than one contract – are they in fact dedicated to the transferring services? if not you can remove them from the pool.

However, if the employees are considered to be assigned, then they're going to transfer automatically. They don't need to agree to the transfer.

An employer may try to reassign the staff elsewhere, perhaps onto a different customer contract or services or to move them around into a different part of the business –This could be immediately before the transfer or a little time before but you've also got to be careful. You've still got to actually deliver those services up to termination, especially if you have KPIs to meet. The supplier also has to be careful not to breach any of those ANTI SABOTAGE restrictions in the contract that Jasmine mentioned. Usually, if there are these provisions in an agreement, there is a carve out so changes can be made with customer consent but it is important to check what the restrictions are so you don't breach these accidentally.

Employees are also still going to be in scope to transfer if they're assigned other than on a temporary basis. So if the outgoing employer does make any changes to their duties they've got to be made on a permanent basis so you can make sure then that the employees won't still be caught by TUPE.

If the employee's contract doesn't allow the employer to change their duties then their consent will be needed for any changes. It's a good idea in any event to make sure the employee is on board with the move, to avoid them trying to unpick everything and claim that they should have transferred at a later date.

You may want more certainty that an employee will not transfer. - employees can legally choose not to transfer, by way of an opt out. –the effect of an opt out would be to end the employee's contract on the transfer date with no entitlement to notice or redundancy. so, understandably, the employee is not going to choose to do this without having the certainty of another job to go to. So usually the existing employer would offer the employee new terms and conditions elsewhere in the business to start immediately following the opt-out. In terms of the process that you would follow here, the employee would sign an opt-out letter and that would usually be sent both to the existing and incoming employer and then they would sign the offer of new terms of employment with the existing employer. This also gives then the incoming supplier comfort that the employee is not going to change their mind and argue that they should have in fact transferred because they've actually decided to opt out of that transfer. And as the new terms start immediately there's no break in service to the employee and they're going to have continuous employment.

Ultimately though, how successfully an outgoing employer is going to be in retaining staff is going to depend on whether the particular employee wants to transfer or wants to remain with their existing employer. It's important to have certainty as an outgoing employer so you know whether you need to backfill or recruit for new staff.

Finally - There may be a commercial decision made that about redundancies to be made pre transfer – so not about retaining staff – but making sire that liabilities are dealt with. As you know – any dismissals made by reason of the transfer will be AU – so if making pre transfer dismissals need to be under a settlement agreement protecting all parties incoming the incoming employer– or employees could still claim against the employer., Often the outgoing employer will be giving indemnity protection for claims from employees who are not intended to transfer – so could end up paying twice – under the SA and under the indemnity. Of course- open to the parties to agree commercially how to apportion costs here – so all will have an incentive to prevent unexpected claims from an employee.

So – now Looking from the incoming employers side, you will usually want a clear list of the employees who are intended to transfer.

Knowing who you are getting also enables an incoming supplier to determine whether it has enough head count to provide the services from day one – or if it needs to recruit – and whether it can comply with any service level commitments. Do have any key skills or knowledge that it is counting on to be able to provide the services? This is especially in very technical sectors or for example where employees have knowledge of the building in a property management context. You may want to ensure that these people come across as key employees – v important can add contractual obligations and protections that the outgoing employer will do everything they can to make sure they will transfer.

Often it will be for the outgoing employer to provide the list - but sometimes another party will be able to have input into this, for example the customer of the services. An incoming employer or the client may not agree with the list put forward by the outgoing employer – they may suspect that the outgoing employer is trying to off load staff – perhaps poor performers or expensive employees, or they have will be employees who work across multiple contracts but will be facing redundancy costs for time on the contract once they have lost one particular client.

Suggested ways to try to challenge this would first be to ask for more information in the first instance, from the customer or outgoing employer. You'd ask about the work the employees are doing, the proportion of their time spent on other contracts and the start date of when they first became dedicated to these particular service – if they were moved recently from elsewhere in the organisation, it might be possible to argue they are not permanently assigned.

Ideally – it is of course better if the parties can come to agreement on the list or accept who has been included, as otherwise this leads to uncertainty and potential claims.

Of course, having a list of transferring employees will not prevent anyone not included claiming that they should have transferred after the event, and so the incoming employer will still need some indemnity protection against costs arising from any 'unexpected transferring employees' –– and protection will often include the costs of making those people redundant.

If a claim is brought by any employee - it will be up to an employment tribunal to decide whether TUPE applies. If it is found not to apply– costs would sit with the outgoing employer but the incoming employer would still have the time and cost of having to fight the claim in the first place.

In conclusion – having contractual warranties and indemnities help address certain risks and liabilities, but when providing a service, having the right employees in place is actually the most important thing to ensure the service can be delivered effectively from day one, in accordance with the contract terms and the client's needs.

Dealing with incoming employees on enhanced terms

Jasmine: Thank you Hannah. In this next section we're moving on to consider how to deal with a workforce when the incoming employees have different terms to the existing workforce and the considerations that might arise.

As employees will transfer on their existing terms and conditions under TUPE, there can be problems with this either for the incoming employer , for example because the terms of the incoming employees are too expensive or can't be replicated going forwards, or problems can arise following the transfer such as potential claims for equal pay where as a legacy of transfers men and women end up being paid differently, or there could be issues with employee relations when the incoming employees have more favourable terms that the existing workforce, or there could be the additional administrative challenge from an HR and Management perspective as it becomes necessary to manage a workforce with inconsistent employment terms.

What transfers

So, in terms of what transfers under TUPE, this will include all contractual and discretionary or non-contractual terms. It's important to remember that some terms which were originally intended to be discretionary in nature can become implied into the contract of employment by reason of custom and practice, so it is important to keep that in mind and make enquiries about the employment relationship as well as relying on the contractual wording.

Reason for changing terms

And this distinction between contractual and non-contractual terms is important in the context of TUPE because TUPE makes it harder for an employer to change terms and conditions of employment where the sole or principal reason for the change is the transfer. Any change will be void unless the sole or principal reason for the change is an economic, technical or organisational reason and the employee must also agree to the change or otherwise the terms of the contract must permit a change.

But the good news is that the new employer has got the same right as the previous employer to make changes if it wants to non-contractual benefits or provisions.

What can employers do when there are inconsistent terms in the workforce?

So what might the incoming employer do in this situation where the incoming workforce has different terms to the existing workforce?

• The first thing to consider is whether a TUPE transfer has actually taken place. It seems obvious and you think you might know but it is worth double checking that the requirements for a TUPE transfer have been met – if they haven't then normal contractual rules in relation to amending contracts will apply and employers could change contractual terms of incoming employees in the normal way, this will of course be open to challenge if you have previously announced that there has been a TUPE transfer so you would need to be careful if you were to rely on that argument when changing terms and conditions.
• Employers could consider ring fencing the transferred employees – This might be particularly useful if incoming employers are in a situation where there is a disparity in pay between men and women and may need to demonstrate that TUPE is the reason for differences in pay rather than reasons based on sex.
• Employers could also identify a reason for making changes to terms and conditions which is not related to the transfer. Such as an ETO reason
• Employers could also transfer an employee to a different job and create new terms.
• They might also try to settle risk associated with changes to employment terms under settlement agreements.
• There is also Dismissal and reengagement – this might be useful for employers who need more certainty around a change in terms but there is a whole separate government code of practice on dismissal and re-engagement if those are the steps you want to follow.
• If however changing or protecting employees' terms and conditions via a route already mentioned is not desired for any particular reason, employers often consider harmonising the incoming employees' terms regardless.

Harmonisation

What we are often asked, is how long do you have to wait before you can 'harmonise' the incoming employees terms and conditions with the existing following a transfer.

First of all you need to be clear that 'harmonising' terms is generally not going to be valid. What we have under TUPE is a restriction on changing terms and conditions and so any change to a contract is void if the sole and principal reason for the change is the TUPE transfer.

So the length of time that passes after the transfer doesn't actually change that position, but length of time might help to a certain extent because the longer away you are from a transfer it makes it look less likely that the transfer is the reason for the change and it also becomes less likely that people will connect the transfer and the change if enough time has passed.

So, what's the risk if you're going to harmonise terms? Well, these are by and large the usual risks of changing terms and conditions where employees don't agree with the changes, employees could react at the time that the employer is trying to implement the change, they could bring claims and if they decide to resign on the back of proposed changes, they can claim constructive unfair dismissal. Sometimes, which is more difficult for the employer to manage, employees may not actually bring the claim straight away but they may carry on working but make it clear that they don't accept changes. The practical difficulty here is that the employer may forget that there is an issue until it becomes relevant. I'm thinking particularly if you've got a change in redundancy terms or restrictive covenants because they're not going to take effect straight away like a change in holiday entitlement or working hours, but then at the point that the employer wants to make redundancies or enforce those restrictive covenants which could be years down the line the employee could then take issue at that point and bring a claim.

In terms of practical tips for harmonisation – realistically if you are offering terms to transferring employees which are better than existing terms, then the employer likely has nothing to be concerned about as the employees are unlikely to complain if the changes are better.

Another option might be to introduce a package of changes, for example giving the employees something good like a salary increase in exchange for losing something/ making their terms worse. You should be aware that even if you are giving a package with good and bad changes this still could carry risk of complaints and claims but you might be able to get employees onboard with negative changes by making it clear that by challenging negative changes later on this will revoke the employees' rights to the positive changes. So that might reduce the risk of claim and complaints.

So, all in all when incoming employers are dealing with a workforce on mixed terms, whether incoming employers decide to find a valid ETO reason for a contract change, ask employees to sign a settlement agreements to cover off the risk associated with changes or whether employers decide to take the risk and harmonise terms, whatever the next steps decided upon incoming employers should take a pause before implementing any changes and consider how changes will be received and assess the potential risk before making changes and if in doubt we'd recommend that employers take advice.

I'll now hand you back to Hannah who will finish by discussing management of performance issues following a transfer.

Managing performance issues with incoming employees

Hannah: The final practical problem that we wanted to address today involves that difficult situation for an incoming employer where you inherit poor performing employees. At their worst they can impact the incoming employer's ability to ensure a smooth transition and maintain productivity

Unfortunately - you can't just refuse to take them just because they are a poor performer. You can't pick and choose who has the right to transfer if they are assigned for TUPE purposes.

So what can you do to help manage the situation?

There are some suggested steps to consider:

If it's before the transfer:

First of all - it's important for the incoming employer to find out about any underperforming employees if they can.

Information provided about the transferring employees- ELI or additional info provided under the incumbent supplier's contract/ from the client might give you a heads up.

In particular – disciplinary and grievance information from the last two years might show up any ongoing or previous issues or disciplinary sanctions.

You might also receive information about any persistent absence issues.

The customer might already have identified issues about the level of service they're receiving which may have led to existing performance issues with certain individuals coming to light. This might have been flagged through complaints against a particular individual such as a receptionist or the supplier might not be meeting overall KPIs in the contract.

The customer may have already started a process to deal with these – for example, they hay have asked the supplier to remove an individual off the service or possibly even dismiss them– or required them to do so by using rights under the contract.

If nothing has been done yet to manage the situation, It might be possible to ask the client to require the outgoing employer to manage this situation before the transfer.

Where there are known performance issues and you as the incoming employer will be taking on the staff – consider whether you can agree some contractual costs protection from the customer in negotiations – you might agree that you will manage the employee post transfer but need indemnity protection against any costs/risks if the situation ends in dismissal – this of course will be a matter of commercial negotiation, but as a supplier you will need to manage the extra costs of carrying out performance improvements while delivering the service.

Don't forget that if the parties agree to exclude the relevant individual from the transfer, or they have been dismissed – this in itself won't remove their protection under TUPE and they could still make a claim against the incoming employer. As I mentioned earlier- if they've been redeployed onto another contract by the outgoing employer, there could still be a risk that they argue they should still claim to transfer. Therefore as the incoming employer, it is important to ensure that protected against claims by contractual indemnity protections from the customer.

Following the transfer:

Of course – an incoming employer might not find out about the performance issues until after the transfer.

You may have warranty protection about the employee information being full and accurate – but these are less likely in a service provision change. You could also perhaps rely on reg 12 protection if full employee liability information has not been provided – if perhaps they have not disclosed disciplinary sanctions for poor performance – but as we know the protection here is limited to £500 per employee, and you would need to show that the failure to provide the information caused the loss, not just that there was a performance issue.

Of course, it is important on any transfer to assess performance quickly and proactively start to manage this from the transfer date as soon as possible in line with all company procedure. It is always helpful to have clear communication to communicate the expectations and performance standards clearly to the transferred employees so they understand their roles, responsibilities, and the performance metrics they will be evaluated against.

As part of this an incoming supplier would be reviewing any employee records provided by the outgoing supplier - these should contain details about previous performance Reviews for the transferring employees which might provide an insight into the employees' work quality, productivity, and any areas needing improvement or training needs.

If the employee has disciplinary warnings or is subject to an ongoing disciplinary process these would be continued after the transfer as the incoming employer effectively steps into the shoes of the previous employer. As a not of caution here - there may be practical problems in taking over a process or relying on a previous warning as an incoming employer – you would still need to make sure you have sufficient evidence and details of ongoing processes to successfully continue them. You'd also need to ensure you had enough of the background to rely on and treat previous disciplinary sanctions as cumulative.

You may also inherit details about any training and development records undertaken by the employees can indicate their skill levels and any gaps that may affect their performance.

However, adequate records may not have been kept, or processes may not have been started – which is why we have the poor performance in the first place.

Ultimately – if you have a poor performer – what can you do? Can the incoming employer dismiss them?

If incoming employer has contractual indemnity protection from the customer as part of the commercial deal which covers subsequent dismissals then it will be protected against the costs of any dismissal and connected claims. If these protections are in place, make sure that the terms and any required procedure are fully followed so you do not risk falling outside its scope.

If you don't have a contractual indemnity -, some employees may still be in their probationary period or have less than two years' service which would mean it is easier to dismiss poor performers.

Employees still currently need two years' service to claim unfair dismissal although this is going to change next year – and it is important to remember that employees have other protections such as discrimination, that could be triggered if the employee is dismissed.

If employees do have unfair dismissal rights, then in the normal way, a fair process would need to be followed – so employer would need to give training and support to help the transferred employees adapt to the new environment and meet performance expectations.

As a final takeaway – it is important for a successful integration of transferring employees into an existing workforce that the employer is seen to behave fairly and consistently with all employees, ensuring policies are followed and issues managed appropriately.

Conclusion

Jasmine: Thank you very much Hannah. And thank you to you all for joining us today. That concludes our session and we hope you found it useful.

Just a quick remainder we have our on demand webinars for the TUPE Club sessions on our website so you can revisit this one if you want to or if there are other topics you are interested in you'll likely find another helpful webinar on our website too.

There will also be a questionnaire that pops up at the end of this webinar and we would really appreciate if you would take some time just to fill in those few questions for us.

The invitation for our next TUPE club session will be circulating shortly and in the meantime if you have got any TUPE questions, please do not hesitate to contact any of us or anyone else in the team here at Gowling.

Thank you and goodbye.